Thanks SteamTrain! You have nailed it! I did the tests you suggested, for mortgage interest amount entered from $0 to $6000, line 9 remained the same at $24,400(Standard Deduction for married filing jointly!)
Once the mortgage interest passed the "threshold"($6000), line 9 starts to change dollar for dollar for the mortgage interest amount above the threshold. So the threshold is really the amount that Itemized Deduction starts to save more than Std Deduction.
The mortgage interest is still dollar for dollar deducted. Just when I chose to do Itemized Deduction, TurboTax displayed the Fed tax due based on Std Deduction until the Itemized Deduction started to save more than the Standard. The "threshold" and lower than expected savings on tax due is just an "illusion" from how TurboTax displayed the Fed Tax due based on Std Deduction first. Basically TurboTax was safeguarding me with savings from the Std Deduction.
Thanks again for everyone's help for me to understand this! This will be very useful for my future tax planning and filing. Maybe in the future TurboxTax can display some notes next to the Fed tax due and let people know the good stuff behind it and avoid confusions.
